Recent environmental assessments have highlighted the extent of land degradation in Australia and the significant costs involved in addressing it. With projected investment costs running into tens of billions of dollars, it is not surprising that greater attention is now being focussed on who should pay. One idea gathering significant momentum has been the imposition of an environmental levy. Such a levy would raise public funds to be spent on resource degradation issues and has been proposed to work through the taxation system in a similar fashion to the Medicare levy, albeit for a more limited 10 year period. The paper assesses the arguments behind the imposition of an environmental levy and considers some of the issues associated with its effective implementation. Particular challenges in the establishment of environmental priorities, public and private attributes of environmental problems and the institutional arrangements for levy collection and management are identified and discussed.